Card Game

Wouldn't it be nice if consumers could avoid costly credit
card balances by financing their own debt? A new retirement credit
card aims to let retirement plan- holders do just that. The concept
is simple--employees with 401(k) savings plans purchase a
retirement credit card for a $50 annual fee. The card then enables
them to borrow up to $10,000, or 40 percent of the money in their
retirement accounts--whichever is less--for any type of purchase
they want to make. Cardholders pay relatively modest
interest--prime plus 2.9 percent--and receive monthly statements
like a regular credit card. Ideally, the card would boost 401(k)
plan participation and enable consumers to replace high-interest
credit cards with a more economical card.

But misuse would offset that benefit. "The risk is that
people don't replace other credit cards; they just add [this
one] and get deeper into debt," says Alicia H. Munnell,
director of the Center for Retirement Research at Boston College.
Such overextension carries a hefty penalty: Employees who fall
three full months behind on payments lose the use of the card, and
the balance of the loan is converted to a 401(k) withdrawal subject
to the resulting income tax and penalties.

Lights Out

The number of companies deregistering from major stock exchanges
(or "going dark") tripled from 2002 to 2003, according to
a 2004 study of the causes and consequences of voluntary SEC
deregistrations. What's more, in early 2004, numbers continued
to be high, says Christian Leuz, a Wharton accounting professor who
co-authored the study.

The reason? Leuz says companies cite the costs of conforming to
the more stringent reporting requirements mandated by the SEC and
detailed in the Sarbanes-Oxley Act of 2002 in the wake of
accounting scandals. "Some smaller companies estimated that
complying with SOX cost them as much as $500,000," he says.
But Leuz adds that some companies may have less pragmatic reasons:
"We found a subset of companies for which less benign motives
seemed possible--namely that controlling insiders pursued
deregistration to evade outside monitoring and additional
scrutiny."

So is the act an investor's watchdog--or a smotherer of
entrepreneurial companies? "SOX is worrisome if its costs are
prohibitive for the entrepreneurial firms that inject new blood
into the economy," notes Leuz, who argues for a tiered
approach to regulatory requirements. "The 'one size fits
all' regulation we have may be well-suited for bigger firms,
but it's not necessarily appropriate for smaller
companies."

Businesses started by
men require an average of

$65K

in startup capital, while those started by women require only

$33K.

Statistic Source:
GEM Financing Report

Small-business owners
with 25 or fewer employees have a

21%

higher income than the general population.

Statistic Source:
Experian

Jennifer Pellet is a freelance writer in New York City
specializing in business and finance.